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Prime Minister Vladimir Putin announced Thursday that Russia would impose a temporary ban on grain exports due to hot weather and drought, driving the benchmark wheat futures to a 23-month high in global markets.

A  burnt car stands at the roadside in the burnt out village of Mokhovoye, Lukhovitsi municipal district, some 130 kilometers from Moscow, August 3, 2010.

Russian experts believe the ban is a hard decision for the world’s leading grain exporter.

A HARD DECISION

"Due to the abnormally high temperatures and drought, I consider it feasible to impose a temporary ban on exports from Russia of grain and other farm produce made out of Russia’s grain," Putin said.

He decided to offer farmers who are suffering in the disaster 35 billion rubles (about 1.17 billion U.S. dollars), ten billion rubles (335 million U.S. dollars) of which they do not need to repay while the rest will be transfered as a three-year privileged credit.

"Of course, we are interested in earning money from grain sales but now the priority task is to support the producers," Putin said.

The government on Wednesday decided to postpone grain interventions on the market previously planned on Aug. 4, before fresh data on the regions’ needs came out.

Dmitry Relko, head of Moscow’s Institute of Agrarian Markets Conjuncture, told Xinhua the ban was "very hard and painful" for Russia’s grain exporters.

"This is unavoidable, though a very painful step for our exporters and agrarian holdings as well as for our buyers, who have already signed contracts with us and who will now have hard times looking for the new sources," Relko said.

He added that finding an adequate replacement for Russian grain would not be a swift matter.

As one of the world’s largest grain producers and exporters, Russia exported 20 million tons of grain in 2009.

Earlier this year, experts estimated Russia would be able to export up to 15 million tons of grain, mostly wheat and barley, in 2010. But the perspective worsened as a record-breaking hot summer unexpectedly hit Russia.

According to the latest figures, ongoing wildfires and drought across western and central Russia have destroyed crops on 10 million hectares, or 20 percent of Russia’s cultivated land.

The agriculture ministry last week lowered its forecast for the country’s grain harvest from 90 million tons to a range of 70 to 75 million tons this year.

A TEMPORARY BAN ?

According to the government, the ban on grain exports will be imposed from Aug.15 to Dec.31. However, Relko said he doesn’t think Russia would resume grain exports even after the announced deadline.

If so, that would have grave implications for domestic export-oriented grain producers, he said.

"If Russia remains out of the world grain market for a long time, our privately owned grain producers will have to switch to some other business or to the less profitable domestic market," Relko said.

But the expert also said this would not be a tragedy for the farmers since nearly all have diversified their operations in various spheres.

Meanwhile, Oleg Aksyonov, head of the agro-industrial department in the Russian Agriculture Ministry, told Xinhua that Putin’s decision to stop grain exports would not affect Russia’s positions on the world grain market.

"We are not going to make any presents to other players, and the measures undertaken are temporal, until we have the precise estimations of this year’s harvest," Aksyonov said. "We in the ministry will take all the measures in the interest of the country."

After Putin announced the ban, Russia also offered the Custom Union’s commission to adopt the same measures in Belarus and Kazakhstan, which comprise a single custom entity with Russia.

VietNamNet/Xinhuanet